VIEWPOINT;WHY MID-SIZE SHOPS SURVIVE;A USPS GAFF

Published on October 28, 1996.

We were never very comfortable with the predictions of a decade or so ago that the advertising agency business would eventually consist of a gaggle of small local shops serving local and regional accounts, and a handful of mega-agencies handling most major accounts.

Clients of the middle-size agencies, it was said, would abandon these shops, with their focus on the U.S., and inevitably gravitate to the bigs as they joined the rush to global marketing.

There seemed to be no allowance in that outlook for the creativity factor in the agency business. So the recent appointments of modest-sized agencies to handle the $70 million to $80 million United Airlines domestic account and the $100 million Acura car account, while surprising, were not at all mystifying.

Eric Conn, senior manager of automotive advertising for American Honda Motor Co., went into the review for Acura insisting on "standout creative"-with car experience not a requirement. He and his company picked Santa Monica, Calif-based Suissa Miller. The 11-year old agency will about double its billings with Acura. As Mr. Conn said, "They can hire the automotive help they need."

United apparently liked the creative and strategic approach of Fallon McElligott well enough to split its global account, giving Fallon its U.S. advertising (which it will handle from offices in Minneapolis and New York) while assigning international and media to the larger Young & Rubicam. Fallon's creative reputation has won it some prestige accounts, though it still ranks below the top 50 agencies.

This is not to say that the mega-agencies are burdened by their size and at a competitive disadvantage when clients go hunting for top-notch creative. But it shows that marketing executives of big companies, playing on a global stage, still respond to fresh, compelling advertising ideas. And those ideas can emerge from agencies of any size.

The Loren Smith affair at the U.S. Postal Service is a costly embarrassment. Costly because Postmaster General Marvin Runyon is losing Mr. Smith, a USPS senior VP-marketing with energy and ideas, at a time when the Postal Service badly needs execs with those characteristics. And embarrassing because Mr. Smith's downfall might have been-should have been-preventable.

If a case could be made for adding $87 million to the fiscal 1996 USPS ad budget of $140 million-by transferring funds from elsewhere in the $650 million Postal Service marketing budget-it appears it was never presented to the Postal Service Board of Governors. They found out after the fact-and exploded. In the fallout, Mr. Smith packed his bags after two years on the job.

The irony is that much of the added funds went to the Postal Service's highly successful comparative ad campaign for its two-day Priority Mail service, which goes head-to-head against Federal Express and United Parcel Service. What marketing exec wouldn't want to expand a campaign that was working? What should have been a success story, however, now turns into audits and investigations and questions about out-of-control postal managers throwing millions of dollars around seemingly without permission.

Messrs. Runyon and Smith have overseen an overdue shake up in the USPS approach to marketing and customer service. Mr. Smith's self-destruction should not be allowed to slow that progress.